CCS far costlier than expected, needs broad state backing – analysis

Carbon Capture and Storage (CCS) is set to be significantly more expensive than most forecasts assume and will therefore require a comprehensive government strategy to take off in Germany and Europe, according to an analysis published by think tanks Agora Industry and Oeko-Institut. 

“The capture, transport and storage of CO2 costs between 150 and 300 euros per tonne,” the think tanks said in a press release. “According to these calculations, the costs of existing or planned CO2 storage projects are at least 50 percent higher than previous forecasts.”

The German government recently created the legal basis for the commercial use of CCS in Germany, by revising its rules on carbon storage and transport, paving the way for the large-scale application of CCS or carbon capture and utilisation (CCU) as part of climate action efforts. The reform allows carbon storage under the seabed, enables the construction of pipelines to transport CO2, and effectively rules out the use of CCS on coal-fired power plants. In late January, the German parliament also approved a reform to enable the export of carbon dioxide for storage in other countries and permanent domestic offshore storage.

Given that CO2 emission allowances per tonne currently cost significantly less in the EU emissions trading system (ETS), investments into rolling out CCS are not profitable. “Moreover, there are long project development times of 6 to 13 years for the construction of CO2 storage facilities under the seabed, which means that available capacities can only be increased slowly and remain limited” the think tanks warn.

“For CCS to succeed in Germany and Europe, political support must focus primarily on closing the cost gap with CO2 prices and securing the construction of CO2 infrastructure,” said Agora director Julia Metz. “Targeted support from the federal government is now crucial to enable industries with no alternatives for reducing emissions, such as the cement and lime industry and waste management, to achieve a climate-neutral future in Germany.”

Central prerequisites for a ramp-up are still lacking, including an industrial policy strategy for its targeted use, a robust carbon price, and steps to ease planning and financing, the report said. “Only with government commitment to developing CO2 infrastructure, robust financing, and broad-based measures to initiate the market can the climate action option of CCS be made available in time,” said Oeko-Institut’s Felix Matthes.

Following an evaluation of offshore CCS projects in the European Economic Area and the UK at various stages of development, the think tanks concluded that existing CCS projects in the EU and Norway are set to achieve an annual storage capacity of only ten million tonnes by the early 2030s. “This is only one-fifth of the EU's target of 50 million tonnes by 2030. In order to meet the EU's storage needs by 2050, two large-scale storage facilities, each with a storage capacity of five million tonnes, would have to be commissioned annually from now on.”